Q4 sales guidance intact, encouraging flight data

CEO sees “light at the end of the tunnel” on vaccine hope

14x EV/EBIT ‘22e, monopolistic market position remains

CEO Torbjörn Johansson expects “1-2 more tough quarters”
Yesterday, we hosted CTT Systems and CEO Torbjörn Johansson at our ABGSC Investor Day. In the short-term, Mr. Johansson maintained the Q4 sales guidance range of SEK 35-45m (down 58-46% y-o-y, ABGSCe 37m) and expected “1-2 more tough quarters” before a notable recovery would take place. However, we find it positive that not only vaccine hopes support the possibility of an aerospace recovery in 2021. According to updated flight statistics, close to 90% of the modern (and most relevant for CTT) B787/A350 fleet was deemed to be in-service, even though flight hour data remained c. 44% below pre-COVID levels. As we have highlighted before, key for a recovery in CTT’s aftermarket business will be the resumption of B787s (and A350s) in operation.

Multiple levers for growth, despite aero industry uncertainty
Mr. Johansson acknowledged that long-term business travel will indeed transform into more digital meetings. However, he remained adamant that short-term travel as well as long-term leisure travel demand would come back. In addition, the raised hygiene concerns on board an aircraft were (again) believed to be drive demand for CTT’s humidifiers. When it comes to CTT’s own operations, Mr. Johansson noted that several sales possibilities existed that could offset lower mid-term OEM deliveries. These included 1) dehumidifier (c. 2,000) repairs on-board the B787 fleet, 2) the ramp-up of the B777X (commercial launch end-21), 3) sales to long-range VIP/private jets (could be 50-100 aircraft per year), and 4) retrofitting humidifiers on-board the c. 1,000 large B787 fleet.

Well-prepared to benefit from air traffic recovery
The CTT share has been weak on the back of the ongoing pandemic (-13% YTD, vs. Carnegie Smallcap index +15%). However, we believe resumed flight traffic and vaccine hopes should raise visibility. The company has delivered >
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